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Most Foreign Invested Enterprises (FIEs) are governed by a board of directors and senior management. An exception exists for Cooperative Joint Ventures that the parties have chosen not to incorporate (these are governed by a management committee).

Powers: The Chairman, as the legal representative of the enterprise, has the energy to legally bind the enterprise and bears important duty for its acts and

omissions. Most of the powers and func...

Board of Directors

Most Foreign Invested Enterprises (FIEs) are governed by a board of directors and senior management. An exception exists for Cooperative Joint Ventures that the parties have selected not to incorporate (these are governed by a management committee).

Powers: The Chairman, as the legal representative of the enterprise, has the power to legally bind the enterprise and bears important responsibility for its acts and

omissions. Most of the powers and functions of the board are set forth in the Articles of Association and in the Joint Venture Contract.

Quantity of Directors: The board of directors of each Wholly Foreign Owned Enterprises (WFOEs) and Joint Ventures are essential to appoint among 3 and 13 directors. FIEs with handful of shareholders might be able to convince the examination and approval authority to dispense with the board of directors and use an executive director.

Membership: In an Equity Joint Venture (EJV), board membership must be proportionate to capital contributions. The board must have a Chairman, but want not have a Vice Chairman. If each are employed, nevertheless, then if the foreign investor selects the Chairman, the Chinese party have to pick the Vice Chairman, and vice versa.

Meetings: Joint venture board meetings should be held after a year, and a quorum is two/3 of the directors. For Equity Joint Ventures, unanimous consent of the board is needed for amendment of the Articles of Association, increase or reduction of the Registered Capital, merger or division, and termination and dissolution. The law is substantially more versatile for Wholly Foreign Owned Enterprises - board meetings and quorum needs are governed by the WFOEs Articles of Association.

Director & Officer Liability: Director and officer liability law and enforcement is not as well-developed as in many Western nations. Correspondingly, the industry for directors and officers liability insurance is not particularly properly-created either. The Chairmans function as the enterprises legal representative encumbers him with each civil and criminal liability for the acts and/or omissions of the enterprise. Directors can be held liable for board resolutions that are illegal or that contravene the Articles of Association and trigger losses to the organization. Directors, supervisors and senior management personnel can be held liable if they cause losses to the enterprise by violating laws and/or the Articles of Association.

Management

Equity Joint Ventures must appoint a General Manager, a single or more Deputy Basic Managers, and a Finance Manager. Although not essential for other FIEs, this is common practice for these enterprises as effectively. If a Chinese investor nominates the Basic Manager of an EJV, a foreign investor may possibly nominate the Deputy Common Manager, and vice versa.

Common Manager: The Basic Manager is charged with day-to-day operation and might be a foreign national if the enterprise so chooses. The responsibilities of the Common Manager must be listed in the Articles of Association even if Chinese law does not need the appointment of a Common Manager (as in the case of WFOEs). The General Manager is charged by law with duty for formulating a management method for the enterprise production, operations and management, employment and termination of employees (except those that need to be employed and dismissed by the board of directors) and implementing board resolutions and investment and business plans.

Deputy Common Managers: A Foreign Invested Enterprise could appoint a single or a lot more Deputy General Managers (EJVs are needed to appoint at least a single).

Finance Manager: An Equity Joint Venture is necessary to appoint a single or more accountants to help the General Manager with finances. This is also widespread practice for other FIEs.

Supervisors

LLCs are required to have supervisory boards, despite the fact that this is typically ignored in practice by WFOEs and Joint Ventures. success